Equitas’s action (the English Proceedings), which Allstate sought to stay, concerned the scope of a commutation agreement between Equitas and Allstate; Allstate had reinsured certain Lloyd’s syndicates. The commutation agreement was governed by English law and contained an English exclusive jurisdiction clause.
Background
Allstate was a party to an arbitration in Texas (the Texas Proceedings) with Highlands Insurance Company (Highlands), which Highlands had commenced in January 2007. The arbitration concerned common account excess of loss reinsurance contracts that Highlands had with Allstate pursuant to its obligations under certain quota share reinsurance contracts; the quota share reinsurers included the Lloyd’s syndicates. Highlands, in receivership since 2003, had received substantial claims and in order to allow the claims to be settled had entered into funding arrangements with the quota share reinsurers. After settlement Highlands billed the excess of loss reinsurers for sums due in respect of the claims but Allstate refused to pay citing the commutation agreement. Allstate claimed that as a result of the commutation agreement Allstate owed no monies to Equitas in respect of the latter’s interest in the common account protection under the excess of loss contracts.
Stay application
Allstate asserted that Equitas’ claim in the English Proceedings was the subject of the Texas Proceedings, proceedings which were being advanced by Equitas through Highlands. Allstate pointed to the fact that Equitas had been involved in the selection of Highlands’ arbitrator and in discussions regarding his fee and had been kept abreast of developments in the positions taken by Highlands. In resisting the application for a stay, Equitas relied on the exclusive jurisdiction clause and the fact that it was not a party to the Texas Proceedings. Equitas said that its awareness of developments in Texas simply reflected its status as a quota share reinsurer.
Allstate’s application for a stay was based on the court’s case management powers rather than on forum non conveniens principles. It sought to stay the English Proceedings whilst the Texas Proceedings were completed but was not seeking to force Equitas to claim in another jurisdiction. In considering the application, the judge cited Rix LJ in Konkola v Coromin who said that although a stay based on case management is possible it requires “rare and compelling” circumstances. The judge agreed that there were a number of factors which pointed in favour of a stay: Equitas’ failure to commence proceedings in England until two years after Allstate raised the commutation defence in the Texas Proceedings; Equitas’ involvement in suggesting Highlands’ arbitrator and its consideration of paying his fee. The judge also agreed that the commutation agreement “loomed large” in the Texas Proceedings.
The judge stated that in circumstances where the parties have agreed to an exclusive jurisdiction clause the circumstances where a case management stay can be granted must rarer and more compelling than those contemplated by Rix LJ in Konkola. The judge also found that the English Proceedings were not concerned with Highlands’ rights under the excess of loss contracts but whether those contracts were within the scope of the commutation agreement. Finally the judge found that Equitas’ involvement in the Texas Proceedings did not go beyond what was appropriate for a quota share reinsurer in these particular circumstances ie the reinsured being in receivership. The judge therefore decided against granting a stay.
Equitas v Allstate is yet another demonstration of the English courts’ desire to hold parties to their agreements regarding jurisdiction.
